No longer just ‘noise’: ongoing trade uncertainty saps investor confidence

There’s both good news and bad news for those who watch how U.S. stock-market investors are feeling about the current state of the equity market.

The good news is that optimism has dropped of late, a trend that is often taken as a positive contrary indicator as it prevents the kind of euphoria that can lead to steeper market declines in the event that the economy doesn’t live up to lofty expectations. The bad news is that the waning investor and business sentiment has come on uncertainty over global trade policy, an issue that appears far from settled, seems to escalate by the day, and which could pose major a major threat to global growth at a time when fewer analysts are expecting conditions to improve over the coming year.

While trade issues have been in the headlines for months — a factor that has kept major stock-market indexes like the Dow Jones Industrial Average DJIA, +0.61%  and the S&P 500 SPX, +0.92%  trading in a narrow range — recent developments have underlined the issue’s potential impact on markets. Several analysts have said that they have only recently begun to fret over the likelihood of a trade war, as well as the severity it could have on stocks.

Perhaps in a representative view, an analyst from Morgan Stanley Wealth Management recently wrote that “We no longer believe that the implications of Washington’s trade talk are benign.”

Read: Stocks may still be underestimating the risk of a blowup in trade tensions

In recent trade developments, U.S. and China slapped levies on $34 billion of each other’s exports, the first tangible shots in a trade battle with no end in sight. President Donald Trump said the U.S. could soon impose tariffs on more than $500 billion in Chinese imports, about the amount

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